Home buyers who take the life insurance deal offered to them by their mortgage lender could be paying 50% more than they need.
Research by comparison website Money-minder found that life insurance and mortgage protection products being sold by the country’s biggest mortgage lenders do not always offer the best value.
In some cases, the site accuses advisers of pushing customers towards taking even more expensive options.
Using one typical example, the difference between the most expensive cover offered, by HSBC, and the cover available via Money-minder was £25.74 per month, or £9,266.40 over the term of the policy.
Researchers from Money-minder approached the biggest mortgage lenders for joint life insurance quotes to cover a mortgage. The cover requested was for mortgage protection cover (decreasing term assurance) of £200,000 for a 30-year term.
The typical male and female couple were non-smokers aged 35 and 30 respectively in low-risk occupations. The cover did not include additional critical illness cover or waiver of premium cover, and all premiums were guaranteed to remain the same throughout the term of the policy.
Halifax quoted £34.66, RBS Nationwide and Natwest all quoted £21.60, and Santander / Abbey quoted £16.35.
The Halifax and HSBC advisers would only offer two single life policies rather than a joint life policy.
This means that both applicants would have £200,000 of cover each, whereas with joint life cover, £200,000 would be paid on the first death of either of the applicants and then the cover would cease. This option does provide more cover than was asked for, and more than the other policies quoted, but it is still an expensive option, said Money-minder.
It told home purchasers to shop around.
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